Stocks head for flat open on Fed disappointment

The Canadian dollar was down 0.35 of a cent to 96.35 cents US as traders avoided risk and bought into U.S. Treasuries.

The euro moved below the key US$1.30 level after Italy paid an average yield of 6.47% for investors to lend it €3 billion over five years.

The yield was up 0.17 percentage point from the last time Italy looked to raise money over five years and was the highest rate since 1997.

Italy has seen its borrowing costs, both in the markets and in bond auctions, rise markedly over the past few months as investors have grown increasingly worried over the country’s ability to deal with its debts, which total around €1.9 trillion, or around 120% of its GDP. It is considered too big to bail out by its partners in the 17-country eurozone.

U.S. futures were lower with the Dow Jones industrial futures down 17 points to 11,878, the Nasdaq futures declined seven points to 2,260.5 and the S&P 500 futures lost 1.7 points to 1,218.5.

Stock markets finished lower Tuesday after the Fed released a policy statement that made clear it was not offering any new steps to help the economy.

The Fed said that the U.S. economy, while improving, is still weak. The central bank added that unemployment remains high, and it remains vulnerable to the European debt crisis, which could push the continent into a recession and slow U.S. growth.

Demand worries and a higher American currency helped push oil prices lower with the January crude contract on the New York Mercantile Exchange down $1.49 to US$98.65 a barrel.

A stronger greenback usually helps depress oil prices, which are denominated in dollars, as it makes oil more expensive for holders of other currencies.

Metal prices were down sharply as the March copper contract in New York was off eight cents to US$3.36 a pound.

The February bullion contract dropped $30.30 to US$1,632.80 an ounce.

European markets were down sharply while London’s FTSE 100 index shed 0.97%, Frankfurt’s DAX dropped one per cent and the Paris CAC 40 gave back 1.45%.

The lack of Fed action depressed Asian stocks as Japan’s Nikkei 225 index fell 0.8%, South Korea’s Kospi lost 0.4% and Hong Kong’s Hang Seng shed 0.2%. Australia’s S&P/ASX 200 rose less than 0.1%.

In corporate news, Agrium Inc. (TSX:AGU) has quadrupled its semi-annual dividend to 22.5 cents per share. The potash producer also approved capacity expansion of one million tonnes at its Vanscoy facility in Saskatchewan.

Moody’s has withdrawn its rating for Sino-Forest Corp.(TSX:TRE). The move by the ratings agency came less than two days after the troubled Chinese timberland owner said it would miss a significant interest payment due this week.

WestJet Airlines Ltd. (TSX:WJA) has signed an interline deal with Japan Airlines that will make it easier for passengers to connect between the two airlines. Passengers will be able to link from Japan Airlines flights landing in Vancouver which will then connect to WestJet flights destined for Calgary, Edmonton, Kelowna, Montreal, Toronto and Winnipeg.